CHAPTER-7 DEMAND, SUPPLY AND PRICE TRENDS OF METALS

Transcription

1 CHAPTER-7 DEMAND, SUPPLY AND PRICE TRENDS OF METALS

2 The demand, supply and price trends of metals viz. Cu, Ni, Co and Mn of nodules are presented in this chapter. The land resources of the world in respect of four metals viz., manganese, cobalt, nickel and copper are presented and compared with potential metal resources present in deep sea manganese nodules. An attempt has been made to draw some inference on future metal requirements based on present and historical consumption and production pattern. Metal prices have also been forecasted in a similar way. 7.1 Global economic resources on land Number of studies has been conducted by various national and international agencies to identify global economic resources. Table provides estimates of the global economic resources of land for four metals viz., copper, nickel, cobalt and manganese. Table-7.1: Global economic resources on land (in million tons) Manganese (metal content) 5000 Cobalt 13 Nickel 140 Copper 940 (Source: U.S. Geological Survey, Mineral Commodity Summaries, January 2004) 7.2 GLOBAL DISTRIBUTION OF LAND RESOURCES Manganese Manganese is the twelfth most abundant element in the earth's crust. Land- based resources are large but irregularly distributed; those of United States are 133

3 very low grade and have potentially high extraction costs. South Africa accounts for more than 80% of the World's identified resources, and Ukraine for about 10%. Table -7.2 provides information on world manganese reserve base and recent data on mine production.. Table-7.2: World manganese mine production, reserves, and reserve base (metal content) (in thousand metric tons) Country Mine production Reserves Reserve base United States Australia ,000 82,000 Brazil 1, ,000 51,000 China , ,000 Gabon , ,000 India ,000 33,000 Mexico ,000 9,000 South Africa 1, ,000 4,000,000 Ukraine , ,000 Other Countries Small Small World Total 8, ,000 5,000,000 (Source: U.S. Geological Survey, Mineral Commodity Summaries, January 2004) Cobalt Cobalt is extracted from four chief types of deposit, usually as a by-product of other metals. It occurs in stratabound copper deposits, in nickel-copper sulphide deposits, in nickel laterite deposits and in silver - cobalt sulpharsenide deposits. Until the 1990s the stratabound copper deposits of Congo DR and Zambia, which occur in sedimentary rocks, were the chief commercial source of cobalt. The 134

4 grade of cobalt in these deposits, present both as cobalt minerals and in pyrite (iron sulphide), is generally between 0.1 and 0.4 %. The nickel and nickel-copper sulphide deposits in Russia, Canada and Australia, which occur as concentrations in mafic and ultramafic igneous rocks, have cobalt grades of around 0.1 %. Cobalt also occurs as oxide and silicate minerals in nickeliferous laterites derived from the weathering of ultramafic rocks. The cobalt content of these deposits is generally between 0.05 % and 0.15 %. Cuba and New Caledonia are the largest sources of lateritic nickel and cobalt but Western Australia also began production in 1990s. Silver-cobalt sulpharsenide deposits in Canada were formerly important but the Bou Azzer mine in Morocco is now the only producer working on this type of deposit. Table provides information on world cobalt mine production and reserve base. Table-7.3: World cobalt mine production, reserves, and reserve base in metric tons Country Mine production Reserves Reserve base United States - - NA 860,000 Australia 6,700 6,600 1,500,000 1,700,000 Brazil 1,200 1,300 35,000 40,000 Canada 5,100 4,700 90, ,000 Congo (Kinshasa) 12,500 10,000 3,400,000 4,700,000 Cuba 3,400 3,200 1,000,000 1,800,000 Morocco 1,300 1,300 20,000 NA New Caledonia 1,400 1, , ,000 Russia 4,600 5, , ,000 Zambia 10,000 12, , ,000 Other Countries 1,400 1, ,000 1,500,000 World Total 47,600 46,900 7,000,000 13,000,000 (Source: U.S. Geological Survey, Mineral Commodity Summaries, January 2004) 135

5 7.2.3 Nickel Identified land-based resources averaging 1 % nickel or greater contain at least 130 million tons of nickel. About 70 % is in laterites and 30 % in sulphide deposits. Nickel laterites occur in present or past zones of the earth that have experienced prolonged tropical weathering of "ultramafic" rocks. The nickel bearing sulphide ores are found mainly in Canada, Russia, Finland, Australia, and Zimbabwe. Lateritic ores generally occur in tropical and subtropical regions, primarily in New Caledonia, Australia, Philippines and Indonesia (Fig. 7.1). These ores also contains cobalt in addition to nickel. Table provides information on world nickel mine production and reserve base. Table-7.4: World nickel mine production, reserves, and reserve base in metric tons Country Mine production Reserves Reserve base United States Australia 211, ,000 22,000,000 27,000,000 Botswana 20,005 18, , ,000 Brazil 45,029 46,000 4,500,000 8,300,000 Canada 178, ,000 5,200,000 15,000,000 China 54,500 56,000 1,100,000 7,600,000 Colombia 58,196 65, ,000 1,000,000 Cuba 73,000 75,000 5,600,000 23,000,000 Dominican 38,859 39, ,000 1,000,000 Republic Greece 22,670 23, , ,000 Indonesia 122, ,000 3,200,000 13,000,000 New Caledonia 99, ,000 4,400,000 12,000,000 Philippines 26,532 27, ,000 5,200,000 Russia 310, ,000 6,600,000 9,200,000 South Africa 38,546 40,000 3,700,000 12,000,000 Venezuela 18,200 21, , ,000 Zimbabwe 8,092 8,000 15, ,000 Other Countries 14,000 12,000 1,300,000 5,100,000 World Total 1,340,000 1,400,000 62,000, ,000,000 (Source: U.S. geological survey, mineral commodity summaries, January 2004) 136

6 Other 2% C8.5 America 9% Africa Asia & Europe 8% 4% Carrribean 7% % Indonesia 12% Philpinnes 17% NewCaledonia 21% Australia 20% Fig. 7.1: World nickel laterite resources Copper Copper deposits are found in a variety of geological environments, depending on the rock-forming processes that occur at a particular location. These deposits can be grouped in the following broad classes: Porphyry and related deposits Sediment - hosted copper deposits Volcanic-hosted massive sulphide deposits Veins and replacements bodies associated with metamorphic rocks Deposits associated with ultramafic, mafic, ultrabasic, and carbonatite rocks. Table provides information on world copper mine production and reserve base. 137

7 Table-7.5: World copper mine production, reserves, and reserve base (in thousand metric tons) Country Mine production Reserves Reserve base United States 1,140 1,120 35,000 70,000 Australia ,000 43,000 Canada ,000 20,000 Chile 4,580 4, , ,000 China ,000 63,000 Indonesia 1,160 1,170 32,000 38,000 Kazakhstan ,000 20,000 Mexico ,000 40,000 Peru ,000 60,000 Poland ,000 48,000 Russia ,000 30,000 Zambia ,000 35,000 Other Countries 1,500 1,500 60, ,000 World Total 13,600 13, , ,000 (Source: U.S. Geological Survey, Mineral Commodity Summaries, January 2004) 7.3. Definition of reserve base and reserves Reserve base is defined as that part of an identified resource that meets specified minimum physical and chemical criteria related to current mining and production practices, including those for grade, quality, thickness, and depth. The reserve base is the in-place demonstrated (measured plus indicated) resource from which reserves are estimated. It may encompass those parts of the resources that have a reasonable potential for becoming economically available within planning horizons beyond those that assume proven technology and current economics. The reserve base includes those resources that are currently economic (reserves), marginally economic (marginal reserves), and some of those that are currently sub economic (sub economic resources). 138

8 Reserves are that part of the reserve base which could be economically extracted or produced at the time of determination. 7.4 RESOURCES OF THE DEEP SEA Problem of estimation Resources of the deep sea bed promise to make an enormous contribution to the world's resource base if their potential is realized. At the present time, the resources of the deep sea bed of immediate interest are in the form of manganese nodules which lie on the surface of the ocean floor and contain important metals like copper, nickel, cobalt and manganese. Several estimates have been made on the inventory of elements in manganese nodule deposits based on the world oceanic area covered with manganese mineral, its thickness and mean composition. However, it may be noted that any attempt to estimate the nodule resources in the ocean can only be expected to generate an order of magnitude figure. Nodule deposits that are likely to be worked out by the first generation of mining may presently be described as " potential economic resources" Potentially economic nodule resources Studies (Archer, 1985) have indicated that about 55 million sq. km of sea floor area i.e., 15 % of the total 362 million sq. km area is covered with ocean nodules. However, these estimates are hypothetical in the present day context and even in near future since many such deposits contain insignificant quantities of nickel and cobalt. Currently, the economics can at best be order-of-magnitude 139

9 estimates. Archer defined "prime areas" as those areas within which the abundance and grade of nodules are notably higher than elsewhere. He defined a class of manganese nodule resources as "potential resources" which were characterized by an average of 2.25 % combined Cu, Ni and Co, occurring with abundance of more than 5kg/sq. m. He further defined the areas in which potential reserves occur as "first generation mine-sites", sites to which the economics of first generation mining and processing equipment will apply. Based on this criterion the assumed economics of first generation mining operations is likely to be in the range of 10 to 100 billion tonnes of wet nodules. The more reasonable estimate may be taken at 25 billion tonnes of wet nodules. To convert to dry tonne 0.7 multiplies the wet tonne assuming that nodules contain about 30 % unbound water Potentially economic resources of metals Table gives estimated values for potentially economic resources of metals from nodules. These estimations have been made based on average metal values in first generation mine-sites as indicated in different studies. Table-7.6: Potentially economic resources of metals form polymetallic nodules Metal values range Metal values average Metal resources % million tons Nodules (Wet) ** 25,000 Nodules (Dry) ** ** 17,500 Manganese 25 to ,000 Cobalt 0.1 to Nickel 1 to Copper 1 to

10 7.5 Comparison of metal resources The comparative data of metal resources (in situ) on land with those in the deep ea nodules are presented in table and figure 7.2. It is clear from the table that metal resources available in polymetallic nodule compares well with land resources. However, the final recovered metals might be quite different and will depend largely on mining and processing efficiency. The processing efficiency for both the cases might be comparable but the mining efficiency for nodules are expected to be lower than land resources. Table-7.7: Comparative global resources of metal form land and nodules (in situ in million tons) Metals Resources on land Nodules (In situ) Manganese Cobalt Nickel Copper Cr' in nn I in 7 IA ens oneme C eit H!tit! 0 *Pt tt IMILen I EN u t Fig. 7.2: Comparative metal resources 141

11 7.6 Comparison of Indian land based resources with metal resources of central Indian ocean basin In the table comparisons is drawn between available land based metal resources in India with those estimated in the Central Indian Ocean Basin. The exercise may look interesting on account of geographical considerations. Table-7.8: Metal resources of land in India and in central Indian ocean basin Metal Land reserves (in- situ) (in million tons) Resources of central Indian ocean basin (in million tons) Explored area Total 1 million application area sq km 300,000 sq km Likely mining area 75,000 sq km Manganese 142 (approximate) Cobalt No proven reserves Nickel No proven reserves Copper FORECAST OF GLOBAL DEMAND AND COST STRUCTURE OF METALS Background Looking ahead to the 21 st century, the following six forces may change the topography of the business landscape. Increased globalization Sustainability Financial Performance (profitability and capital productivity) Customer Expectations Changing work force requirements, and Increased Collaboration. 142

12 The two fundamental factors affecting the metal market and ultimately the price are supply and demand. Geographic concentrations of metal resources, disparity between developed and developing countries in metal production, consumption and development of substitutes are some of the peculiar features, which impose indirect restrictions on the metal market. Historical data helps in predicting the future requirements. Forecasting real market patterns for periods more than one or two decades away is really complex particularly when an entirely new source of supply from nodule mining may likely to be introduced. As mentioned earlier an attempt has been made to draw some inference on future metal requirements based on present and historical consumption and production pattern. Metal prices have also been forecasted in a similar way Projected growth for metal consumption/demand Economic, technological and societal factors influence the supply and demand of metal. As society's need for metal increases, new mines and plants are introduced and existing ones expanded. In times of market surplus, existing operations can be scaled back or closed down, while planned expansions can be delayed or cancelled. a) Manganese The percentage per annum growth rate for manganese based on ore consumption is summarized in table It can be seen from the table that 143

13 compounded growth rate per annum from 1950 to 1960 was possibly one of the highest i.e., 8.92 %. After that the average growth rate per annum is approximately 3 %. Table-7.9: Manganese growth rate profile based on world manganese consumption (% PA) Year Consumption Compounded annual growth rate `000 metric tons % PA Average ( ) 5.22 b) Cobalt The percentage per annum growth rate for cobalt based on cobalt consumption is summarized in table The average growth rate per annum for cobalt from 1966 to 1971 was 1.07 %. However, it increased to 3.78 % from 1971 to The average per annum growth rate from 1976 to 2000 was 2.79 %. Table-7.10: Cobalt growth rate profile based on world cobalt consumption (% PA) Year Consumption Compounded annual growth rate metric tons % PA Average (1966 to2000) Average(1976 to 2000)

14 c) Nickel The percentage per annum growth rate for nickel based on average nickel consumption is summarized in table The average growth rate per annum for nickel from 1980 to 2003 was 2.42 %. However, from 1993 to 2003 this rate increased to 3.33 %. Table-7.11: Nickel growth rate profile based on world nickel consumption (% PA) Year Consumption Compounded annual growth rate `000 metric tonnes % PA (-) Average (1980 to 2003) 2.42 Average (1990 to 2003) 3.33 d) Copper The percentage per annum growth rate for copper based on copper consumption is summarized in table The average growth rate per annum for copper from 1980 to 2003 was 2.15 %. However, during 1990 to 2003 the annual growth rate was 2.85 %. 145

15 Table-7.12: Copper growth rate profile based on world copper consumption (% PA) Year Consumption Compounded annual growth rate % PA `000 metric tons (-) Average (1980 to 2003) 2.15 Average (1990 to 2003) Projected growth rates The projected long term growth rates based on the average of historical data for all the four metals are provided in table It is expected that global manganese consumption will 3 % per annum while cobalt, nickel and copper consumption will 2.75, 3.00 and 2.50 % respectively. Table-7.13: Projected growth rate (% PA) Metal Projected growth rate Manganese 3.0 Cobalt 2.75 Nickel 3.00 Copper

16 7.7.4 Expected consumption of metals by 2020 The expected consumption of metals by 2020 based on projected growth rate is summarized in table The expected growth rate for manganese, cobalt, nickel and copper will be 3.0, 2.75, 3.0 and 2.75 % respectively. Table-7.14: Expected consumption of metal during 2020 Metal Present expected consumption, tones Expected consumption during 2020 Manganese 450, ,000 Copper 480, ,000 Nickel 30,000 54,000 Cobalt Historical price data The historical metal price pattern for manganese, cobalt, nickel, and copper are summarized as below at figure

17 Ea A: Historical Price Data Manganese Ore (48-60%) O cr) ZO 8: Historical Price Data-Cobalt Metal #13 O D &i C: Historical Price Data-Nickel Metal 13: Historical Price Data-Copper Metal Fig. 7.3: Pattern of metal prices over the years (U.S. geological survey, mineral commodity summary 2004) 148

18 7.7.6 Projections of long term metal prices The long term projections of the demand are essential to determine the long term price, and, therefore are an important factor for investment decisions, as well as for decisions related to the increase or decrease of the production capacity. One of the main parameters related to the income - yield capacity in the mineral and metal industries is the long term price, and therefore the need for long term projections of the demand. Based on the historical metal prices and the interplay of the various factors, longterm price forecasts beyond 2004 can be made based on average growth in the metal prices. The metal price growth rate since 1910 to 2004 are summarized in table-7.15, 7.16, 7.17 and 7.18 for manganese, cobalt, nickel and copper respectively. The average compounded price growth rate based on historical prices for manganese ore, cobalt, nickel and copper metal are as follows: Manganese Ore 2.56 A) Cobalt metal 3.56 % Nickel metal 2.97 % Copper metal 2.49 %. Although the metal market is very volatile but it is expected that long term metal prices may increase based on average price growth rate as projected above. 149

19 Table 7.15: Manganese ore price growth rate based on real ore price (% PA) Year Real ore price US $/ton * Compounded annual growth rate (-) (-) (-) 5.52 Average (1910 to 1998) 2.56 * (U.S. geological survey, mineral commodity summary 2004) Table 7.16: Cobalt metal price growth rate based on real metal price (% PA) Year Real metal price US $/ton * Compounded annual growth rate (-) (-) (-) (-) Average (1910 to 2000) 3.56 * (U.S. geological survey, mineral commodity summary 2004) 150

20 Table 7.17: Nickel metal price growth rate based on real metal price (% PA) Year Real metal price US $/ton * Compounded annual growth rate (-) (-) Average (1910 to 2004) 2.97 * (U.S. geological survey, mineral commodity summary 2004) Table 7.18: Copper metal price growth rate based on real metal price (% PA) Year Real metal price US $/ton * Compounded annual growth rate (-) (-) (-) Average (1910 to 2004) 2.49 * (U.S. geological survey, mineral commodity summary 2004) 151

21 7.8 Observations / Conclusions To meet the ever-increasing metal demand the land based resources will be fast depleted. More number of primary metal producers will enter the market and possibility of using alternate resources like polymetallic nodules will enhance. It is expected that by 2020 polymetallic nodule may become a commercially viable resource option especially for a country like India, which even today meet its nickel and cobalt demand through imports. T- 152